Leaked presentation details plans for the $100M hardware startup fund that Formation 8 is raising
Inside Formation 8's Secret Strategy To Invest In Hardware — The venture capital firm Formation 8 wants to raise $100 million to invest in hardware makers.
Context & Ripple Effects
In spring 2015, Formation 8 — which had already closed its second fund at $500 million to connect opportunities between Asia and the U.S., out of roughly $1 billion raised — was pitching LPs on a dedicated $100M vehicle for hardware makers, per the leaked deck. The timing made sense on paper: that same month, Kickstarter and Indiegogo posted a record hardware-crowdfunding quarter with 128 projects pulling in $68.4M, evidence of a supply of hardware founders looking for follow-on capital.
The fund never got its shot. Within six months, a harassment suit against a co-founder and challenges in Asia had driven Brian Koo and Joe Lonsdale apart, the firm cancelled its third fund entirely, and Lonsdale spun up "8 Partners" with a separate $400M raise. The leaked deck is now a snapshot of the hardware-VC thesis just before its flagship proponent dissolved.
First-order effects
- Hardware startups in Formation 8's pipeline were counting on a dedicated $100M pool sized specifically for capital-intensive companies — instead they inherited a firm in breakup mode with no successor hardware vehicle.
- Lonsdale's response was immediate: rather than salvage the joint firm, he took the fundraising machinery to a new vehicle, leaving Koo and the Asia-facing strategy behind.
Second-order effects
- LPs who liked the Asia-U.S. bridge thesis had to choose sides between the founders' successor vehicles, fragmenting a $1B franchise into smaller pools rather than consolidating it.
- With Formation 8 gone from the category, hardware founders' funding path ran through crowdfunding platforms like Kickstarter and Indiegogo — whose record Q1 showed demand but at check sizes an order of magnitude below what a dedicated VC fund would write.
Third-order effects
- The episode foreshadowed a decade-long pattern: dedicated hardware funds proved fragile relative to software franchises, and hardware capital only returned at scale through generalist megafunds like a16z's $20B growth-stage raise rather than specialist vehicles.
- The geographic thesis also inverted — where Formation 8 bet on bridging Asia and the U.S., the current wave of hardware startups such as Westmag and Atlas is raising money precisely to build components like actuators outside of China.
The trend: Hardware venture capital has cycled from fragile specialist funds with Asia-bridge theses in the mid-2010s to today's megafund-backed bets on rebuilding the hardware supply chain outside China.